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Market Volatility Bulletin: Support Is Now Resistance

Dec. 06, 2018 2:15 PM ETDIA, EEM, IWM, QQQ, SPY, SVXY, UVXY, VGK10 Comments
The Balance of Trade profile picture
The Balance of Trade


  • European equities are at two-year lows, and Treasury yields are plunging.
  • With markets in flux, it is natural to study up on the market more; work hard not to misread the arguments of others.
  • Russell acted as a volatility dampener during the summer; I see reversal.

Market Intro


S&P futures fared pretty well during the partial session yesterday, while markets rested in honor of the passing of former President George H. W. Bush, closing at 2718.

But as soon as today's pre-market began, futures were down handily. The CME had to halt trading on more than one occasion. US stocks (SPY, DIA, QQQ, IWM) have since bounced off their lows, but the damage is still quite real, especially as it follows on the heels of a gruesome Tuesday.

Spot vol has gone basically vertical over the last couple sessions. On Monday, the index tracked in the 16's.


European equities (VGK, EEM) now trade at two-year lows. The US is off its highs of the year, but is still faring much better than other markets.


Rates have positively dumped over the past couple weeks. It may well be the case that the drop in rates acts as reason for risk assets to rally, as the absolute level of rates makes the "TINA" argument more compelling.

Thoughts on Volatility

Famous bond fund manager Jeff Gundlach has a lot of personality, to put it mildly. Who knows what he actually has or has not said.

The larger point I'd like to make is this: particularly at points of stress, it is easy to stuff words into the mouths of others. At times like these, it is okay to have a view, but it becomes all the more important to listen objectively to others, mindful of the notion that we all come pre-wired with this erroneous paraphrase mechanism.

On that note, I think what Mr. Thrasher is trying to demonstrate is that the S&P 100-day moving average has now acted as resistance quite definitively on three separate occasions.

The line has not formally rolled over

This article was written by

The Balance of Trade profile picture
Adam Zingg, CFA offers both practical and theoretical perspectives that will benefit readers who wish to learn more about how to execute  on views or strategies that interest them.  Whatever your overarching philosophy or expertise, I believe there is value in understanding how trading works. This is perhaps especially true for investors, who often take a more philosophical, less mechanical view when it comes to their processes. It is not my goal to:1) convince you which side of the market to be on2) establish your trading time frames3) have you directly follow any specific trade ideasInstead, I aim to demonstrate how complicated sounding ideas can be simplified and accessible.  My hope is to grow your tool kit of resources, and give you healthy confidence to execute your own personalized strategy.  Trading and investment are fascinating, applicable across a wide variety of fields and disciplines.  Greater focus on targeting, execution, and exit strategies build transferable life skills.  In reading my work, it is my goal that you will consistently glean useful insights and build skills that enhance your ability to trade and make important decisions.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

I actively trade the futures and options markets, potentially taking multiple positions on any given day, both long and short. I also hold a more traditional portfolio of stocks and bonds that I do not "trade". I do believe the S&P 500 is priced for poor forward-looking returns over a long timeframe, and so my trading activity centers around a negative delta for hedging purposes.

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